Does Delaware Incorporation Affect Executive Compensation? An Empirical Analysis

32 Pages Posted: 20 Feb 2012

See all articles by Pornsit Jiraporn

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Jullavut Kittiakarasakun

affiliation not provided to SSRN

Pandej Chintrakarn

Mahidol University International College (MUIC)

Date Written: February 19, 2012

Abstract

Motivated by agency theory, this study attempts to ascertain whether chief executive compensation is influenced by legal rules. In particular, we analyze whether Delaware law has an impact on CEO pay. Legal rules have been argued to impact agency conflicts. Agency costs, in turn, affect CEO compensation. Thus, we contend that Delaware law influences CEO pay through their associations with agency problems. The empirical evidence corroborates this hypothesis, showing that Delaware firms pay their CEOs significantly more generously than do non-Delaware firms (about 36% higher in total compensation). Furthermore, Delaware firms exhibit significantly lower pay-performance sensitivity (almost 50% lower), implying that the higher pay more likely reflects rent expropriation rather than shareholder wealth maximization.

Suggested Citation

Jiraporn, Pornsit and Kittiakarasakun, Jullavut and Chintrakarn, Pandej, Does Delaware Incorporation Affect Executive Compensation? An Empirical Analysis (February 19, 2012). Available at SSRN: https://ssrn.com/abstract=2007983 or http://dx.doi.org/10.2139/ssrn.2007983

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

Jullavut Kittiakarasakun

affiliation not provided to SSRN ( email )

Pandej Chintrakarn

Mahidol University International College (MUIC) ( email )

999 Buddhamonthon 4 Road
Salaya, Nakhonpathom, 73170
Thailand
66 (0) 2441 5090 (Phone)
66 (0) 2441 9745 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
62
Abstract Views
1,003
rank
364,313
PlumX Metrics